Iceland’s Financial Crisis
Iceland financial crisis was became a crucial topic in the global financial market. Several years before the crisis occurred Iceland was in really well condition. They were in favorable economic condition such as strong economic growth encouraged by economic reforms, deregulation, and low inflation. Financial crisis began in 2008 when the three major banks in Iceland they are Landsbanki, Glitnir, and Kaupthing collapsed within few days and then followed by the bankruptcy of Lehman Brothers in the United States. However, after the crisis happened there was a long-running dispute due to who will be responsible to pay the failed deposits in Iceland three largest banks. However, Iceland currently has developed dramatically and revived from the crisis.
In the last couple of years before the crisis happened in Iceland, they had such a good economic condition, particularly before 2006. This certain years Iceland has been in really well condition. For example from the output, consumption, investment in FDI and domestic steeply grew in the last decade. By the beginning of the 21st century, Iceland had come to epitomise the global credit boom. Its banks expanded dramatically overseas and foreign money poured into the country, fuelling exceptional growth (BBC News report, 2013). Another important issue is the government debt was also almost non exist with just less than 7% of the GDP. Approximately around 300.000 citizens in Iceland there was no unemployment at that time. They had huge amount of assets around ten times of their GDP. At the beginning the Icelandic banking system was owned by the government. When they started to privatize the banking system the economic was booming, seems like international creditors were too interested and lending limitless amounts to Iceland. The flow of foreign credit was improved steeply. The real GDP were also reached the peak until 2008 as shown on the graph below.
Started in 2006 some of...
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